Prime Minister George Papandreou on Thursday said lowering the interest rate and extending the maturity of European Union and IMF loans to Greece would be "decisive factors" to guarantee that the country was able to continue meeting its long-term objectives. He also warned against the prospect of restructuring Greek debt, saying that this could have dire consequences for Greece but also for Europe.
"We are putting our house in order but we need the support of our European partners," Papandreou said in an interview published by the French newspaper "Le Monde" ahead of a Eurozone leaders meeting on Friday. If markets failed to respond to Greece's efforts, the EU would have to step in in order to assist Greece's efforts and stabilise the Euro zone, he added.
"There are considerable margins to manoeuvre in order to relax the terms of the financial support programme," Papandreou said.
The Greek premier arrived in Paris on Thursday for a meeting with French President Nicolas Sarkozy scheduled to begin at 6:00 p.m. Greek time.
Asked to comment on Moody's decision to once again cut Greece's credit rating, the Greek premier accused the rating agency of "completely overlooking" the reality of the situation and the significant sacrifices and changes made by Greece.
"It is one more proof that Europe must decide on the adoption of rules for rating agencies," he added, stressing that Friday's meeting of Eurozone leaders and the EU summit on March 24-25 will be "one of the last chances for Europe to face up to the markets."
"We must not fail. We have to take enough courageous and adequate measures in order to put an end to the cycle of instability and uncertainty. Markets have realised that this sort of failure could lead to a return of the crisis," he underlined.
Concerning the 'Competitiveness Pact' proposed by France and Germany, Papandreou said that reducing the "competitiveness gap" and promoting economic convergence were important factors for growth but not an immediate answer to the crisis.
"Improving competitiveness is just one component part of a much larger whole capable of dealing with the crisis. At this point, any other approach beyond a collective solution could proved inadequate," he emphasised.
Among others, the Greek premier again urged European leaders to employ all instruments at their disposal to make the European Financial Stability Fund more flexible and to consider ideas such as a financial transactions tax or Euro-bonds.
Papandreou ruled out the prospect of restructuring Greece's debt, making it clear that this was "not on Europe's agenda". He warned that such a scenario could have serious repercussions for the European banking system, lead to the collapse of Greek banks but also an "avalanche" of speculative attacks on a large number of other European countries. In addition, it would also inflict substantial financial damage on Greek pension funds that had invested heavily in state bonds.
"It is a very heavy price to pay, if there is another alternative solution," he emphasised, pointing out that such an outcome would benefit neither Greece nor the European economy.
Asked about the shortfall in state revenues, the Greek premier pointed out that an unprecedented reform programme had helped reduce Greece's public deficit by 6 percent of GDP in 2010, while the economy was expected to return to growth by the end of 2012. On the need for privatisations to pay down debt and the problems that arose when EU-IMF experts announced an ambitious expansion of the privatisations programme, Papandreou denied that there was "an issue of sovereignty" and said misunderstandings were "inevitable" when so many reforms were taking place in such a short space of time.